The ever-volatile cryptocurrency market was hit once again this week from different sides, but most could actually be connected to the United States.
Here are some of the possible reasons why BTC dumped by ten grand from Monday to Sunday morning.
Weak US Economy
The week started on a high note as bitcoin’s price soared by $3,000 on Monday and touched $70,000 for the first time since early June. This came just a day or so after Donald Trump’s appearance at the 2024 BTC conference in Nashville, where he made some grand promises, like saying he would fire SEC Chair Gary Gensler on his first day in office.
Being pro-bitcoin and crypto now, his words had a positive effect on the entire market, but that was short-lived. Later on Monday, BTC fell by four grand, and it kept dumping at the end of the week. In fact, the cryptocurrency fell to $62,200 on Friday evening after the US released its July jobs report.
It suggested that the world’s largest economy could be in a more worrying state than many believed, as the unemployment rate had soared to 4.3% – the highest since October 2021. Wall Street reacted with immediate price declines but so did crypto.
However, BTC and the altcoins kept plunging during the weekend due to their 24/7 ability to be traded. The largest digital asset fell to a 3-week low of just under $60,000, thus losing over ten grand in less than a week.
Fed’s Next Move
As mentioned above, the listed reasons are entirely related to the US. In this case, we will focus on its central bank and its highly-anticipated next move.
Earlier this week, the Bank of England lowered the interest rates in the country by 0.25 basis points in the first cut since the pandemic. Thus, the UK’s central bank joined other prominent institutions like the ECB and the Bank of Canada in reducing the rates.
However, the US Federal Reserve continues to postpone such a move and the rates are at a multi-decade peak of 5.25% to 5.50%. However, the pressure on Fed Chair Jerome Powell keeps mounting, as Dem Senator Elizabeth Warren urged him to cancel his vacation plans and cut the rates now instead of waiting for September, when most experts believe the reduction will occur.
Lower interest rates are generally perceived as bullish for risk-on assets like crypto as they make borrowing cheaper. As such, this uncertainty regarding the Fed’s next move could be among the reasons why some investors have decided to leave the crypto market, at least for now.
ETF Outflows
The two aforementioned reasons actually relate strongly to this one. The reports of a weak US economy and the uncertainty around the Federal Reserve’s actions have scared off some investors, especially larger ones – those who tend to use ETFs to get exposure to crypto.
As reported on Saturday, the outflows from the spot Bitcoin ETFs skyrocketed to almost $240 million on Friday – the highest in about three months. The withdrawals from the Ethereum ETFs continued to be in the red for a second consecutive week.
The ETF flows have proven in the past that they could have an immediate impact on BTC’s price, especially the outflows. Consequently, they could be a major reason behind the asset’s fall to and below $60,000.
If you want to check how low BTC can go during this correction, you can read this article.
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